Hon Alan Chan noted that in 2025 the average length of stay and per capita spending of Mainland visitors declined. Some industry members indicated that certain hotels have transformed or changed use. The Member asked whether the Government would:

1. Introduce a “hotel building allowance” similar to the industrial building allowance, including a 20% initial allowance on capital expenditure for hotel construction;
2. Increase the plot ratio for hotel projects by 20% to 25% under specific conditions;
3. Freeze the Hotel Accommodation Tax (HAT) until room demand exceeds supply, with reference to a year‑on‑year increase of over 3% in Revenue Per Available Room (RevPAR) as a benchmark for resuming collection.

LCQ3: Measures to enhance reception capacity of hotel industry https://www.info.gov.hk/gia/general/202604/01/P2026040100344.htm 

Government’s Response

The Secretary for Culture, Sports and Tourism responded that Hong Kong’s tourism performance in 2025 remained strong, with visitor arrivals reaching nearly 50 million, representing a 12% year‑on‑year increase. Non‑Mainland visitors grew by 15%. In the first three months of 2026, visitor arrivals exceeded 14.31 million, up 17% year‑on‑year, and full‑year arrivals are projected at 53.8 million. As at end‑February 2026, Hong Kong had 333 hotels providing 93,481 rooms. The average hotel occupancy rate in 2025 was about 87%, reaching around 90% during the Mainland Chinese New Year Golden Week.

Regarding taxation, the Government advised that under the Inland Revenue Ordinance, hotel operators may claim a 4% annual allowance on capital expenditure for commercial buildings, but there is no 20% initial allowance as applicable to industrial buildings. Renovation expenditure may be deducted over five years. The Government indicated no plan to introduce a separate hotel building allowance.

On development incentives, the Government stated that hotels are classified as non‑domestic buildings, which generally enjoy higher permissible plot ratios than domestic buildings. Certain facilities are exempt from Gross Floor Area calculation, and planning relaxations have already been implemented in selected districts. The “Pay for What You Build” Pilot Scheme also allows land premium assessment based on hotel use and permits phased development to ease upfront capital pressure.

With respect to HAT, the Government reiterated that the tax was resumed in January 2025 at 3% as part of fiscal consolidation measures. It noted that in 2025 average occupancy increased by around 2% and overnight visitors increased by about 6% compared to 2024, suggesting limited impact on travel sentiment. Estimated HAT revenue is HK$770 million in 2025/26 and HK$800 million in 2026/27. The Government clearly stated that it currently has no plan to freeze or adjust the tax rate.

Follow‑up Questions from Members

uring supplementary questions, Hon Vivian Kong raised concerns about rising operating costs, geopolitical uncertainties, regional competition, and the potential impact on occupancy levels. The Secretary responded that while measures would be considered should occupancy show a sustained downward trend, current performance indicators remain positive, including notable growth in non‑Mainland visitors.

Hon Perry You also noted that the number of operating hotels had decreased by six between January and February 2026. The Development Bureau advised that eight hotel building plans involving approximately 1,900 rooms were approved in 2024/25, and that planning flexibility would continue to be provided to align development with market needs.

In addition, NPP Hon Judy Chan expressed concerns regarding hotels being converted into student hostels. The Government indicated that under the relevant scheme, around 30 applications had been received, of which only two involved small hotels totalling approximately 130 rooms, suggesting that such conversions remain limited in scale.

The Federation will continue to monitor developments and maintain dialogue with the Government on issues relating to taxation, land supply and the sustainable development of the hotel sector.